Investing, Asset Allocation, Economics & the Search for the Bottom Line

Book Bits | 4.14.2012

● Breakout Nations: In Pursuit of the Next Economic Miracles
By Ruchir SharmaReview via Kirkus Reviews
The head of Morgan Stanley’s emerging markets division conducts a brisk worldwide tour in search of new markets ready for takeoff. No first-book jitters for Sharma, longtime columnist for the likes of Newsweek and the Wall Street Journal. His smooth, almost chummy style suits him ideally for guiding civilians through the sometimes-arcane thicket of the dismal science, looking for those emerging markets likely to disappoint or exceed expectations in the coming years. Sharma insists on the importance of on-the-ground observations, and he’s recently visited all the countries discussed here. While recognizing that factors explaining growth change continually, he divulges some helpful, broad rules of the road. We learn, for example, why a particular nation’s form of government counts less than the economic understanding and vision of its leaders, why the size and growth of a nation’s second city is important and why the list of top-ten billionaires matters.

● The Reckoning: Debt, Democracy, and the Future of American Power
By Michael MoranExcerpt via The Huffington Post
Americans must learn not to take their unmatched economic advantages for granted, lest they disappear. These advantages come in several forms, starting with the American currency. Because most of the world’s trade is denominated in US dollars, the price Americans pay for most commodities (oil, for instance, or food) is just a bit lower than elsewhere, even if they may be subject to a little more volatility as part of the deal. Similarly, because the US Federal Reserve controls the number of dollars in circulation, America can sustain policies — like the near-zero federal funds rate that has prevailed since the ﬁnancial crash — that would have global bond markets baying for the blood of any other nation. These low rates effectively lower the ultimate return-on-investment foreign creditors will receive for purchasing American debt through the sale of US Treasury bonds and other government securities. With US national debt heading into record territory versus annual GDP growth, the ability to keep interest rates artiﬁcially low is no small advantage. But these perks of global dominance will erode along with America’s hegemony, and erratic policy measures in Washington will speed the arrival of that day. Already global markets are chirping, and China, Russia, and other economic rivals have demanded that the dollar be supplanted as the global reserve currency by something else. This will not happen quickly unless American politicians, by strangling growth with budget cuts in the midst of a downturn, stupidly force the issue.
● Is China Buying the World?
By Peter NolanReview via Publishers Weekly
In this informed review of international business patterns, Nolan (Integrating China: Towards the Coordinated Market Economy), a professor of Chinese economy at the University of Cambridge, answers the title’s rhetorical question in the negative. As Nolan notes, the ascendancy of multinational corporations stemming from the liberalization of international trade since the 1970s has made allegiance to “home” countries a polite fiction in the global market. While multinationals seek access to the markets of developing nations, Nolan clarifies that foreign direct investment in other regions exceeds that in China. Although China’s immense foreign-exchange reserves, the largest of any nation, fuels apprehension in the West, this issue should be seen in context—the holdings of Western asset fund managers overshadow them. Unfortunately, Nolan slights some important considerations: for example, he acknowledges Beijing’s historic determination to build “a group of globally competitive giant firms to match those from the high-income countries,” but leaves largely unexplored the implications of the advantages these companies can derive from the state’s “majority equity share” and “high investment rate.”
● The Decline and Fall of Europe
By Francesco M. BongiovanniSummary via publisher, Palgrave Macmillan
Is Europe Doomed? What if it fell apart? What if the Eurozone crisis was just the beginning of what’s in store for Europe? What if there were other destructive forces besides economic ones that threatened to blow the entire edifice into pieces? InThe Decline and Fall of Europe, Dr. Francesco M. Bongiovanni offers a unique panoramic view of the intractable challenges Europe faces today, starting from the birth of “Project Europe” with its unique political and economic model, charting the progress and shortcomings of the Union, addressing how the continent has descended into geopolitical irrelevance, how Europeans espoused what became the unsustainable “civilization of entitlements”, the challenges of enlargement and the question of Turkey’s accession, how decades of mismanagement of immigration planted the seeds of social instability, how growth has become a forgotten word in most of Europe, and how the Euro, intended to be the glue holding the Union together is threatening to bring it down instead. The conclusion that increasing impoverishment and instability await Europeans seems inescapable. The book offers a timely, multi-dimensional and irreverent portrait of a decaying Europe, reviewing in detail the causes and consequences of a decline which is going to affect Europeans as well as the entire world.
● Save More Tomorrow: Practical Behavioral Finance Solutions to Improve 401(k) Plans
By Shlomo BenartziLecture by author via Allianz Global Investors
In November 2011, Professor Shlomo Benartzi, of the UCLA Anderson School of Management and Chief Behavioral Economist of the Allianz Global Investors Center for Behavioral Finance, spoke at the TED@AllianzGI conference. His topic was how behavioral finance, a combination of psychology and economics, can help people avoid making “money mistakes” associated with retirement planning. One of the most effective behavioral finance tools is Save More Tomorrow™, a savings enhancement program that helps people overcome behavioral challenges so they can save adequately for retirement. The program shows that behavioral finance not only works but is also extremely powerful. Professor Benartzi chose the program’s name as the title of his new book, Save More Tomorrow: practical behavioral finance solutions to improve 401(k) plans, which presents this and other behavioral finance tools that address a wide range of retirement planning mistakes.
● An Economist Gets Lunch: New Rules for Everyday Foodies
By Tyler CowenSummary via publisher, Penguin
Tyler Cowen discusses everything from slow food to fast food, from agriculture to gourmet culture, from modernist cuisine to how to pick the best street vendor. He shows why airplane food is bad but airport food is good; why restaurants full of happy, attractive people serve mediocre meals; and why American food has improved as Americans drink more wine. And most important of all, he shows how to get good, cheap eats just about anywhere. Just as The Great Stagnation was Cowen’s response to all the fashionable thinking about the economic crisis, An Economist Gets Lunch is his response to all the fashionable thinking about food. Provocative, incisive, and as enjoyable as a juicy, grass-fed burger, it will influence what you’ll choose to eat today and how we’re going to feed the world tomorrow.